Medicaid programs are jointly financed by the federal and state governments, even though they are administered by the states. The amount of the federal share paid to the states for medical assistance is called the federal financial participation ("FFP"). The proposed regulations state that there will be a denial of FFP for designated health services, furnished under the state plan, to an individual on the basis of a physician referral that would result in the denial of payment under the Medicare program if Medicare covered the services to the same extent and under the same terms and conditions as under the state plan. Thus one must be aware that the term referral, in Stark II's application to Medicaid, is a referral for comparable Medicaid services, which are covered under the Medicare program.
The proposed regulations also add new provisions creating reporting requirements to state agencies. More specifically, financial relationships must be disclosed to the state agency absent certain exceptions; however, the state agency has the authority to designate exactly what information is required for disclosure. Another attempt to conform the Medicaid provisions with the Medicare provisions comes in the area of prepaid plans. An exception has been added, protecting services furnished by Medicaid counterparts of Medicare managed care contracts.
- Penalties As noted above, the proposed regulations deny a FFP payment to a state for designated health services furnished under the state Plan to an individual on the basis of their physician referral that would violate the proposed regulations if Medicare covered the service in a comparable manner. The commentary to the proposed regulations indicates that Stark II does not apply directly to Medicaid physicians and providers. Consequently, a state is free to pay for these items and services, but it risks not receiving FFP. Thus, the effect of these regulations means that no penalty is imposed on physicians for Medicaid referrals. Sanctions for these types of referrals remain in the power of the states to make, and physicians and providers should monitor their respective state laws closely for any prohibitions and limitations.
- Advisory Opinions On the same day that HCFA issued the proposed Stark regulations, it also issued regulations, it also issued regulations implementing an advisory opinion process for Stark related requests. This allows interested parties to request a written advisory opinion concerning whether a referral relating to designated health services (other than clinical laboratory services) is prohibited under Stark. Requests must be made by a party to the arrangement and must involve existing arrangement or one into which the requestor in good faith plans to enter, thus eliminating hypothetical situations from consideration. These advisory opinions will be binding on both the Secretary of the Department of Health and Human Services and the requestor, although under certain circumstances HCFA has the power of rescission. Providers should note that any request submitted may include some risk that the information submitted may be used against them later.
There has been public word that HCFA will be making an effort to enforce the Stark law now that the proposed Stark II regulations are published. Although these regulations are defined as being "proposed," caution should be used in dealing with items, services and relationships covered within. Physicians and providers should also be aware that these proposed regulations could become final regulations, adopted only in part, amended or revised, or remain as "proposed" for an unlimited time.